When
Citigroup
Inc.
won a contract in 2012 from
China Petroleum & Chemical
Corp.
, or Sinopec, to shuffle cash around the world for Asia's biggest refiner, the agreement generated few headlines. But the U.S. bank says the deal has helped it win key roles on Sinopec's bumper crop of bond offerings this year, which included the biggest from Asia in a decade.

ENLARGE

Citigroup handles an array of services for China National Petroleum Corp. Above, a CNPC facility in Tianjin.
Imaginechina/Associated Press

As investment banking in Asia suffers its worst year since 2009, instead of proclaiming their work on the latest IPO or merger deal, banks are touting their success in grind-it-out businesses like cash management and cross-border transactions.

Investment-banking revenues in Asia, excluding Japan, were down 19% in the first nine months of the year from the same period a year earlier and were almost 30% below the peak in 2011, when revenues totaled US$10.5 billion, the high-water mark for investment banking in Asia over the past decade, according to data provider Dealogic.

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The weak market could weigh on banks' earnings and revenues at a time when big lenders already complain of slow growth in developed markets, and it has further dashed hopes that Asia would become a big investment-banking profit center.

Banks aggressively expanded their Asia operations when the region rebounded quickly after the worst of the global financial crisis. That led to a wave of expensive hiring for an expected boom in stock and bond underwriting and advice on mergers and acquisitions.

ENLARGE

"After the global financial crisis Asia was seen as the remaining pocket of growth in the world, especially in investment-banking terms," said
Derek Ovington,
head of regional banks, Asia, at Hong Kong-based brokerage CLSA Asia-Pacific Markets. "Investment banking has been disappointing, but traditional commercial banking, lending and transaction banking has been doing very well."

According to Boston Consulting Group, revenue from account and transaction banking in emerging Asia is expected to grow 14% a year between 2012 and 2022 as foreign companies boost their business in the region and local companies venture abroad.

That means basic corporate banking is now getting more attention.
Standard Chartered
PLC this year flagged a contract to set up a "foreign-currency cross-border sweeping structure" for energy giant Royal Dutch Shell PLC's China unit. Essentially, the bank manages the oil giant's cross-border foreign-currency lending linked to its operations in China.

Local players are joining the big global providers such as
Deutsche Bank
AG
and Citigroup in seeking to boost this business, which has the attraction of providing steady returns without the need to hold lots of capital in case of losses.

"The market right now is very competitive. It has created an excess of trade finance versus the demand," said
Simon Constantinides,
HSBC Holdings
PLC's head of trade and receivables finance for Asia-Pacific. Transaction banking is the basic plumbing of the global financial system. It requires scale and sophistication to profitably move trillions of dollars across borders for companies.

The payoff, bankers say, is that once banks provide transaction services for companies, the business often expands from there to include more profitable products such as lending and underwriting.

"It's the business that underpins a lot of our client relationships," said Amol Gupte, treasury and trade solutions region head for Asia at Citigroup. "You get in with this. You can then build a lot of the other business you want to."

Citigroup, for example, also moves cash across the world for China National Petroleum Corp., the country's largest oil and gas producer by volume. That relationship began in the 1990s and now covers services such as loans and trade finance through to the capital markets, where banks can earn large fees.

The U.S. bank—which drew 31% of its global transaction profits from Asia during the first half of the year,making it the largest region for the bank in this area—has also broadened its relationship with South Korea's
LG Electronics
from transaction banking to foreign-exchange services in more than 50 countries.

Illustrating the growing emphasis on this kind of banking in Asia, Bank of America Merrill Lynch in September appointed a new global transactions services sales chief to be based in Singapore, the first such global role in the bank to be based in the region.

U.S., Japanese and regional lenders are increasingly fighting for market share, pressuring already thin margins. Lenders from Australia and Singapore are targeting a greater share of their revenue to come from transaction services. "The supply has ensured that the price has come down," said
Sameer Sawhney,
managing director of global transaction banking at
Australia & New Zealand Banking Group
Ltd.
The Melbourne-based bank wants to build its transaction banking business to 40% of earnings from 26% in 2012.

Singapore-based
DBS Group Holdings
Ltd.
says revenue from its global transaction business jumped 31% in 2012. And local rival
United Overseas Bank
Ltd.
wants to double its cross-border business for Hong Kong-based companies expanding into Southeast Asia within three years.

Faced with weak investment-banking markets, lenders have no choice but to compete for transaction banking business. Investment-banking revenue in Asia, excluding Japan, fell 19% in the first nine months of this year from the same period last year, to US$6.0 billion, according to Dealogic. Fees are down for mergers and acquisitions and syndicated lending while revenue for equity and debt capital market work have ticked higher.

Including Japan, investment-banking revenue is down a more modest 9%, though it is still at the lowest level since 2009.

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